I recently wrapped up an interview with James Turk of GoldMoney.com. James is a true expert in the field of Gold and Monetary History. Here are some of the highlights:
Q: I wanted to get your take on a possible end of cycle gold target. In the 1970s, gold increased 25 times and silver went up about 37 times. If we take the $250 low for gold in 1999, and we multiply that by 25 times, we get a target of $6250. Do you think that by the end of the cycle, we will see a $6000 gold price?
JT: Well, I think that's a little bit low. Back in October 2003, I was interviewed by Barrons and they asked for my target of when this bull market would be over and I said it would be some time between 2013 and 2015. My view was that gold would be over $8000 an ounce. The gold:silver ratio would probably be 20 ounces of silver to 1 ounce of gold, so silver would be $400 an ounce. Back in 2003, gold was $350 an ounce so $8000 seemed pretty ridiculous in terms of a forecast but it is working and gold is moving in that direction and I think it will continue to move that way but there's a logic to that forecast. I related back to the 1970s how gold went from its low of $35 to $800 approximately at its peak. In October 2003, when I had that interview with Barrons, gold was $350 which was approximately 10 x its price in 1971 of $35. The interesting thing is that it took in 2003 approximately $10 to purchase what $1 purchased in 1971 because of inflation in the intervening 32 years. So, on an inflation adjusted basis, if gold can go from $35 to $800 in the 1970s, it can go from $350 to $8000 on an inflation adusted basis this time around. So, I'm sticking to that forecast of basically saying history is going to repeat, history has been repeating and I think it's going to continue to repeat and by 2013, we're going to be around $8000 an ounce, maybe higher.
Q: As far as year-end targets, do you think we'll see $2000 gold this year?
JT: It's hard to predict short-term targets, next month, next two months or year end. All you have to be focusing on is to continue to accumulate in this bull market and focus on where the bull market is going. It's always going to go much further than you expect. It's probably going to last longer than I expect and go higher than I expect. Just continue to accumulate. The gold price probably should be over $2000 now but because of government intervention and anti- gold propaganda by the government. Gold is still undervalued, even though the price has been rising, it's still undervalued by all of my historical measures. It's not quite as undervalued as it was 10 years ago but it's still very undervalued because what's happening over the last 10 years, even though the price of gold has gone up, the dollar has been debased by inflation and what central banks are doing to mismanage the dollar. Focus on the long-term and not so much the price of gold but whether it's good value or not. And it's good value on a numerical basis based on my historical measueres and it's also good value because of its usefulness as a tangible asset. It's a monetary asset that doesn't have counterparty risk.
Q: I actually like silver more than gold. I think we might be going into a hyperinflation and if we do go into a hyperinflation, I think silver might perform a little bit better because it's a monetary metal, it's an industrial metal, do you like silver more than gold?
JT: I am more bullish on siilver than I am on gold. And that's why I think the ratio is going to be going down to 20 ounces of silver to 1 ounce of gold in the long-term from 40 ounces of silver to 1 ounce of gold in the present. Silver will outperform. The problem with silver is there is more volatility to it than there is with gold and as a consequence the volatility is not for everyone. But if you're prepared to accept that volatility, I think you have 2/3rd in gold and 1/3rd in silver. I think that's a good mix.
Q: I also think, like you, that it's investor demand that's going to light the fuse of the gold market, it will overwhelm the paper market. 58% of gold demand last year went to India and China alone, which is pretty staggering. You can walk to into a bank in China, you can buy gold and silver. The Chinese government is urging its citizens to buy gold. This is in stark contrast to what our government tells us over here, the propaganda we get from our media over here, that gold is a barberous relic, that it's not worth owning. Isn't it a bit ironic that the communist Chinese might be the ones to liberate the gold market?
JT: Yea, I lived in Asia for most of the 1970s and one of the things that struck me then is that gold is part of the tradition and culture throughout Asia. If you said to anyone in Asia that gold is not money, they would think that you landed from Mars. To them, gold is money. The Chinese character for gold is the same as the character for money. I don't look at annual supply/demand statistics because gold doesn't get produced and disappear like all other commodites do. Gold gets produced and accumulated. So gold mined by the Romans 2000 years ago is indentical to gold mined yesterday in Nevada. So the supply of gold is this 164,000 metric tons in the above ground stock and what's added every year is inconsequential. What happens to this above ground stock and more specifically, what happens to gold, gold goes to where the wealth is being created. What's happening in China and Asia, a lot of wealth is being created there. So you saw, earlier this decade, European Central banks selling their gold and it was being bought by China and other places in Asia. It also was bought by individuals. What's happening in Asia is a remarkable event. You have literally billions of people coming out from a defunct Communist system entering a Capitalist system. Chinese are hard working, focused on education, want to raise their standards of living, and they're doing that through hard work and wealth creation. And as they accumulate more wealth, inevitably more of that wealth is going to go into gold. That's going to create a big factor as to what's going to happen to the price of gold in relation to all national currencies of the world.
Q: GATA has a conference coming up in London, Gold Rush 2011, at the Savoy Hotel Aug 4-6th, where you will be a featured speaker. Maybe you could clue as in as to what it's all about?
JT: This is GATA's 4th conference. I'm honored to have been invited to the previous 3 and now I will be speaking at the 4th one. GATA, I can't speak for it because I'm not on the board of directors or anything like that, but what GATA has made clear is that their objective is to provide educational information about gold and the gold market and they aim for the gold market to be free of government intervention. I think GATA has been very successful in achieving that aim and bringing attention to the gold market and I think this one will be an important one for GATA to achieve its objectives.
Q: I love the idea and concept behind GoldMoney, tell us what GoldMoney.com is all about?
JT: It's very simple. It's a very economical, convenient and most importantly, safe way to buy gold and silver. The convenience of using the internet is something gold and silver buyers didn't have until recently. One of the factors that we have is that we're a European based company and we offer storage in different vaults in London, Zurich, and Hong Kong. While you may want to have some gold and silver stored in your house or buried in your backyard, you also want to have some geographical and political diversification for your gold and silver and that's what we offer with GoldMoney by enabling you to store in different vaults around the world. We're presently storing about $2 billion in precious metals, owned by 19,000 customers in 87 different countries around the world.